Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
International Arbitration (3rd edition)
Arbitration is not allowed in matters that are not, by law, potentially capable of amicable settlement between the parties. For example, matters that would give rise to criminal charges that cannot be waived cannot be subject to arbitration. Also family law matters are not arbitrable. Transfer of title to real property is not arbitrable.
As a matter of principle, parties may have recourse to arbitration with respect to any right that they enjoy freely (Article 2059, Civil Code). Parties are free to arbitrate anti-trust and intellectual property disputes, for example. Thus, there are only a limited number of types of disputes that may not be resolved by arbitration. The types of disputes that cannot be resolved by arbitration include those relating to:
- Civil status and capacity of natural persons.
- Divorce and judicial separation of spouses.
In addition, disputes involving certain categories of public authorities and entities cannot be arbitrated.
In principle, certain types of consumer and employment disputes also cannot be resolved through arbitration.
However, the Court of Cassation has held that this prohibition does not apply in the same way to international arbitration (Court of Cassation, First Civil Chamber, 5 January 1999, No. 96-21.430, Zanzi). For example, in the case of an international employment contract containing an arbitration clause, the French courts considered that the arbitration clause was not null and void but that the employee was nevertheless not prevented from initiating a claim before the French Employment Courts (as would normally be the case with a valid arbitration clause) (Court of Cassation, Social Chamber, 16 February 1999, No. 96-40.643).
Arbitration is not to be used in criminal cases, cases involving family law or in any matter of public policy. Furthermore, Cap. 4 states that in any case that fraud is suspected, the Courts may decide to terminate the arbitration agreement.
According to Section 2 (1) of the Arbitration Act, any claim under property law is arbitrable, with the exception of disputes arising from consumer contracts, disputes connected to the enforcement of decisions and incidental disputes. A condition is also, that an arbitration agreement may be concluded only in cases where a settlement is possible (section 2 (2) of the Arbitration Act).
Legislation does not define expressively the term “property law dispute”, but according to Czech legal theory, these disputes are any disputes, where the value of the subject of the dispute is expressible.
The latest important evolution happened in 2016 - since 1st December 2016, disputes arising from consumer contracts are completely non-arbitrable and it is not possible to conclude an arbitration agreement for such cases.
As per Romanian law, the following categories of disputes are deemed non-arbitrable in case of domestic arbitration:
(i) disputes concerning the civil status and capacity of individuals, inheritance, family relationships and rights upon which the parties cannot decide;
(ii) disputes concerning assets that are not freely transferable or disposable;
(iii) disputes falling under the exclusive jurisdiction of the courts of law (e.g., those concerning judicial liquidation, certain disputes in the intellectual property field, etc.).
Under Serbian law, the dispute is arbitrable if it meets the following two conditions:
Firstly, the subject matter of the dispute must concern a right in property that the parties may freely dispose of, and secondly, it cannot concern a matter which is within exclusive competence of state courts.
In addition, Private International Law Act prescribes a number of disputes that are within the exclusive competence of state courts which exempts them from arbitration e.g. disputes related to the proprietary rights over real property in Serbia, family and matrimonial disputes or inheritance and testamentary matters.
Moreover, some other laws contain provisions which stipulate the competence of courts for certain types of disputes making it less clear whether these provisions also create an exclusive jurisdiction of the said court. Such is the case of the competent court regarding corporate disputes.
It has remained unclear to this day whether matters related to insolvency and winding up proceedings, antitrust/competition law, intellectual property rights or consumer rights are deemed arbitrable.
The general principle regarding arbitrability in China is stipulated in Article 2 the Arbitration Law, namely, only contractual disputes and other disputes arising from property rights and interests between citizens, legal persons and other organizations of equal status in law can be arbitrated.
According to article 3 of the Arbitration Law, the following disputes shall not be submitted for arbitration: (1) disputes concerning marriage, adoption, guardianship, child maintenance and inheritance; and (2) administrative disputes falling within the jurisdiction of the relevant administrative organs according to law.
Arbitration practice has also made it clear that matters related to insolvency liquidation and intellectual property dispute with an administrative nature cannot be arbitrated.
In recent years, a debated issue with regard to arbitrability in China is the arbitrability of the Partner-Private Partnership (PPP) contract. It has been argued that because PPP contracts fall into the category of administrative contracts, disputes arising from PPP contracts are non-arbitrable. However, in 2014 the Supreme People’s Court opined through a second instance case that because the subject matter of the dispute was independent from administrative acts during the performance of the contract, the dispute is of a civil nature.
a. According to the Danish Arbitration Act 2005 all matters that falls within “freedom of contract” are arbitrable. Certain exceptions are made however, e.g. disputes arising from residential rental contracts must be settled by the courts. Furthermore, disputes regarding exercise of public authority is not regarded arbitrable. Finally, as regards consumer contracts, the arbitration agreement is only valid, if entered after the dispute has arisen.
In principle disputes concerning proprietary or non-proprietary rights, except for child/spousal support cases, are arbitrable, if they could be the subject of a court settlement.
In general, it is considered that a dispute lacks arbitrability, if the public interest or interests of third parties are at stake. It is accepted that the following disputes lack arbitrability:
- Disputes over personal rights of individuals (e.g. defamation)
- Disputes over entries in public registers
- Certain non-monetary family matters.
It is recognized that this criterion applies also to corporate disputes, which may make certain types of corporate disputes non-arbitrable, e.g., involving the validity of corporate resolutions. This issue is controversial, however.
Commercial disputes which relate to the registration of real estate, insurance policies and commercial agencies are generally not arbitrable.
The arbitrability of each dispute will, however, be considered on its own merits.
Both contractual and non-contractual disputes can be submitted to arbitration (s.6(1) of the 1996 Act, see also the recent case of Fiona Trust & Holding Corporation v. Privalov (2007) UKHL 40. Examples of non-arbitrable matters under English law include criminal matters, insolvency proceedings (which are subject to the statutory regimes set out in the Insolvency Act 1986), and certain instances where a statutory body has jurisdiction over particular disputes (see Clyde & Co LLP v Bates van Winkelhof  EWHC 668, where an employee had statutory rights to have their case heard before an employment tribunal).
Under the KSA Law of Arbitration, the non-arbitrable types of disputes include personal status and matters wherein conciliation is not permitted, such as Hudud.
Most civil disputes are arbitrable, including consumer, antitrust and employment disputes. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (Antitrust); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (U.S. 1991) (Employment). However, the FAA explicitly states that it does not apply to employment contracts for transportation workers engaged in interstate commerce, including “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 28 U.S.C. § 1. Criminal disputes are not considered arbitrable.
In international arbitration, art. 177 para 1 PILA and the case law of the Swiss Federal Tribunal provide for a broad definition of disputes deemed arbitrable as any dispute of financial interest, i.e. any claim that ultimately pursues an economic purpose, may be subject of an arbitration procedure. Thus, also monetary claims in family and inheritance law, monetary claims relating to intellectual property and competition as well as antitrust law are deemed arbitrable in Switzerland. Thus, solely matters concerning the legal status (e.g. marriage, separation, divorce, matrimony, paternity, adoption etc.) and some matters relating to insolvency law (opening of bankruptcy proceeding, arrest etc.) are deemed non-arbitrable in international arbitration.
In contrast thereto, the definition of arbitrability in Swiss domestic arbitration is more restrictive than its understanding in Swiss international arbitration. Pursuant to art. 354 CPC, a dispute may only be submitted to an arbitral tribunal if the parties are free to dispose over the rights and duties in question. In particular and contrary to the situation in international arbitration, labor law disputes in a domestic context are solely arbitrable if the respective arbitration agreement was concluded a minimum of one month after the end of the employment relationship (art. 341 para 1 Swiss Code of Obligations). In addition, labor law rights confirmed by the Swiss Code of Obligations as non-waivable will also not be deemed arbitrable in a domestic context.
The notion of arbitrability in Switzerland did not undergo any major changes throughout the last few years. The interpretation of arbitrability continues to be broad, particularly in international arbitration. Also the partial revision of the PILA will not change this situation.
Any pecuniary claim that lies within the jurisdiction of the courts may be submitted to arbitration. Non-pecuniary claims may be submitted to arbitration to the extent parties are able to conclude a settlement agreement on the matter in dispute. Disputes that fall into the competence of the administrative authorities are not arbitrable.
Family law matters as well as all claims based on contracts that are — even only partly — subject to the Tenancy Act (Mietrechtsgesetz) or to the Non-Profit Housing Act (Wohnungsgemeinnützigkeitsgesetz) as well as all claims concerning condominium property may not be made the subject of an arbitration agreement. In addition, certain (collective) labour and social security matters are not arbitrable.
Disputes involving consumers or employees may only be submitted to arbitration (with additional formal requirements) after the dispute has arisen. The additional formal requirements are extensive, rendering arbitration agreements in these areas highly impracticable.
The ACA does not set out the disputes that are considered non-arbitrable. However, section 57 of the ACA defines arbitration to mean commercial arbitration, and “commercial” entails all relationships of a commercial nature. Further, the full title of the ACA states that it is an Act to provide a unified legal framework for the fair settlement of commercial disputes by arbitration and conciliation. Disputes arising from non-commercial transactions may not be referred to arbitration under the ACA. Criminal prosecutions, proceedings for the judicial review of administrative action and proceedings to dissolve marriages, for example, are unabitrable. See United World Ltd Inc v MTS (1998) 10 NWLR (Pt. 568) 106. One can find broader suggestions that issues as to whether a conduct amounts to a crime or a payment or transaction is taxable, or whether given parties are or were truly married are all non-arbitrable, but these all appear, strictly speaking, to be overbroad.
Under Portuguese law, arbitrable disputes are the ones involving economic interests and others which, although not involving economic interests, may be settled by the parties.
According to the previous voluntary arbitration act, dated 1986, only disputes relating to disposable rights could be subject to arbitration. The new voluntary arbitration act (LAV), currently in force, has thus broadened the concept of arbitrability by adopting the economic criteria of interests at stake along with the disposition of rights.
The Code of Commercial Procedure and Code of Civil Procedure, amended in 2015, list non-arbitrable disputes, including, in particular, those relating to insolvency, registration of legal entities or sole proprietors, intellectual property (partially), administrative and other public law issues, privatisation, public procurement, labour and employment, inheritance, consumer protection, etc.
Furthermore, as part of the 2015 reform, most corporate disputes became arbitrable subject to the condition that they may be referred only to arbitral institutions that have obtained a special authorisation from the Russian Government and adopted the rules on arbitration of corporate disputes; and the seat of arbitration of corporate disputes must be in Russia. However, a number of corporate disputes remain non-arbitrable (e.g., disputes on convocation of the general annual meetings or disputes arising out of buy-backs).
Russian courts have recently taken a stand that disputes involving “public element” — e.g., concluded for public purposes or involving state budget funding — may be non-arbitrable even though the legislation is silent in this respect.
The Arbitration Act 2010 states that it does not apply to an arbitration relating to terms and conditions of employment or remuneration of employees or to arbitrations under the Industrial relations Act, 1964 or to arbitrations under the Property Values (Arbitration and Appeals) Act, 1960. To all intents and purposes, the main restriction is that relating to employment contracts.
A dispute is considered non-arbitrable if the subject matter is not capable of being settled by agreement between the parties. A dispute is also likely non-arbitrable in cases where a third party’s consent is required, and in some aspects as far as it concerns rights in rem. Furthermore, a claim is non-arbitrable if the relief sought may only be granted by a state authority or the courts. Such cases include declaration of bankruptcy, taxation, the existence and validity of patents, certain competition law disputes such as imposition of fines, ordering a company to cease and desist activities harmful to competition, and granting clearance for acquisitions of businesses.
Objective arbitrability is dealt with at section 1030 (1) ZPO. Any claim involving an "economic interest" ("vermögensrechtlicher Anspruch") is arbitrable. The German arbitration law hence differs from the UNCITRAL Model Law which requires a dispute to be "commercial" for its arbitrability.
An arbitration agreement concerning claims not involving an economic interest shall have legal effect to the extent that the parties are entitled to conclude a settlement on the issue of the dispute.
There is a number of matters which are considered non-arbitrable under German law. The following list is not exhaustive:
- Pursuant to section 1030 (2) ZPO, an arbitration agreement relating to disputes on the existence of a lease or residential accommodation within Germany shall be null and void, except for residential accommodations as specified in section 549 (2) Nos. (1) to (3) BGB.
- Divorce, child custody matters, issues of family status, criminal law matters are not arbitrable.
- Employment matters are only arbitrable in accordance with specific provision of the German Labour Court Act.
- Matters typically involving third party interests may be considered non-arbitrable, such as disputes about the existence of a patent or shareholder disputes aiming at erga omnes effect (unless the parties obey the strict rules formulated by the Federal Supreme Court for certain company types (GmbH and KG) in the decisions Schiedsfähigkeit II and Schiedsfähigkeit III in 2009 and 2017, respectively; the DIS has enacted Supplementary Rules for Corporate Law Disputes that aim to comply with the Federal Supreme Court's rulings).
Pursuant to section 1059 (2) No. 2 a) ZPO, an award can be set aside if the court finds that the subject-matter of the dispute is not capable of settlement by arbitration under German law.
After entry into force of the Croatian Arbitration Act in 2001, Croatia placed itself amongst the states that allow arbitration in the widest variety of disputes. Thus, the parties may agree on arbitration for the settlement of disputes with respect to rights of which the parties may freely dispose with.
Croatian law limits the possibility of choosing the seat of arbitration outside of Croatia. The parties may agree to arbitration outside of Croatia only in disputes with an international element and provided that Croatian courts do not have exclusive jurisdiction to hear such disputes.
Generally under Chilean law, matters that affect public policy and third parties rights are deemed as non-arbitrable.
As for more specific regulation, Articles 229 and 230 of the CJO refer to the main disputes that are considered non-arbitrable in domestic arbitration. Under such provisions, (i) alimony, (ii) partition of goods between husband and wife, (iii) criminal causes, (iv) matters of local police, (v) disputes between principal and agent and (vi) disputes in which the Fiscal Judicial must be heard, may not be referred to arbitration. Also, Article 5 of the Chilean Labour Code provides for labor matters as non-arbitrable.
Accordingly, Article 1(5) of the ICAL specifically states that the law does not change the domestic regulations on non-arbitrable matters. Furthermore, the legislative history of the ICAL shows that matters of public policy shall not be resolved under international arbitration procedures.
Neither the CJO nor the ICAL provisions regarding the non-arbitrable matters have been subject to modification in the recent years.
The following matters are non-arbitrable under Philippine laws:
a.) labor disputes;
b.) civil status of persons;
c.) validity of a marriage;
d.) any grounds for legal separation;
e.) jurisdiction of courts;
f.) future legitime;
g.) criminal liability;
h.) future support; and
j.) those which by law cannot be compromised. There has been no amendment on the cases that are non-arbitrable in the recent years.
The arbitrability question is controlled by article 867 GrCCP as regards domestic and international commercial arbitration alike. It provides that any private law dispute may be referred to arbitration as long as the parties are vested under law with the power to freely dispose of its subject matter. Certain classes of disputes which meet said prerequisite are nevertheless expressly excluded on the basis of other considerations. This holds true for example as regards labor disputes, the exclusion of which is premised upon the perceived necessity to protect the interests of employees.
Said doctrine is well-established in legal literature and case law. No recent developments exist. There is an ever-growing body of case law ruling on the arbitrability of certain types of disputes along lines which are indeed predictable given the said standard derived from substantive law.